Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No o

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
web site, if any, every interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes x No o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No x

The accompanying
unaudited consolidated financial statements of Caliper Life Sciences, Inc.
and its wholly owned subsidiaries (collectively, the Company or Caliper)
have been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC) and generally accepted
accounting principles for interim financial information. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles (GAAP) have
been condensed or omitted pursuant to such rules or regulations. The December 31,
2008 consolidated balance sheet has been derived from the Companys audited
financial statements as of that date, but does not include all disclosures
required by U.S. GAAP. In the opinion of management, all adjustments
(consisting of normal recurring entries) considered necessary for a fair
presentation have been included. However, these unaudited consolidated
financial statements should be read in conjunction with Calipers Annual Report
on Form 10-K for the year ended December 31, 2008.

Operating results for the
three months ended March 31, 2009 are not necessarily indicative of the
results that may be expected for the full fiscal year or for any future
periods. For example, the Company typically experiences higher revenue in the
fourth quarter of its fiscal year due to spending patterns of its customers,
and may realize significant periodic fluctuations in license and contract
revenue depending on the timing and circumstances of underlying individual
transactions.

Caliper currently
operates in one business segment: the development and commercialization of life
science instruments and related consumables and services for use in drug
discovery and development and other life sciences research.

As shown in the
consolidated financial statements, at March 31, 2009, Caliper has a total
cash, cash equivalents and marketable securities balance of $23.8 million and
an accumulated deficit of $309.1 million.
On March 6, 2009, Caliper entered into a Second Amended and
Restated Loan and Security Agreement (the Credit Facility) with a bank. The
accompanying financial statements assume that Calipers cash, cash equivalents
and marketable securities balance at March 31, 2009 and access to
available capital under its Credit Facility are sufficient to fund operations
through at least January 1, 2010, based upon its current operating plan.
Calipers ability to fund its operations will depend on many factors, including
particularly its ability to increase product and service sales, control margins
and operating costs and maintain its borrowing capacity and compliance with the
covenants of its Credit Facility. As more fully described in Note 8, the amount
of available capital that Caliper is able to access under the Credit Facility
at any particular time is dependent upon a borrowing base formula, which
ultimately relies on the underlying performance of the business. The Credit Facility
also contains certain rights which, if exercised by the lender, could result in
any or all of the following: an acceleration of the maturity date of any
outstanding debt, a reduction in borrowing capacity, and a termination of
advances. If economic conditions worsen and Calipers business performance is
not as strong as anticipated, then Caliper could experience an event of default
or a reduction in its borrowing capacity under the Credit Facility, which if
not cured to the banks satisfaction, could potentially have a material adverse
impact on its ability to access capital under its Credit Facility in order to
fund planned 2009 operations. If such events were to occur, Calipers business
would be adversely affected.

The accounting policies
underlying the accompanying unaudited consolidated financial statements are
those set forth in Note 2 to the consolidated financial statements
included in the Companys Annual Report on Form 10-K for the year ended December 31,
2008, filed with the SEC on March 13, 2009. Those policies are not
presented herein, except to the extent that new policies have been adopted or
that the description of existing policies has been meaningfully updated.

In November 2007,
the Emerging Issues Task Force (EITF) issued EITF Issue No. 07-1 (EITF No. 07-1),
Accounting for Collaborative Arrangements
Related to the Development and Commercialization of Intellectual Property. EITF No. 07-1 requires collaborators in
such an arrangement to present the result of activities for which they act as
the principal on a gross basis and report any payments received from (or
payments made to) other collaborators based on other applicable GAAP or, in the
absence of other applicable GAAP, based on analogy to authoritative accounting
literature or a reasonable, rational, and consistently applied accounting
policy election. During the first quarter of 2009, Caliper adopted EITF No. 07-1. The effect of adoption did not have a
material impact on Calipers financial statements and therefore did not require
retroactive application as Calipers collaborative agreements do not
incorporate such revenue- and cost-sharing arrangements.

In September 2006,
the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 157,
Fair Value Measurements (SFAS No. 157) effective for
financial statements issued for fiscal years beginning after November 15,
2007. SFAS No. 157 replaces multiple existing definitions of fair
value with a single definition, establishes a consistent framework for
measuring fair value and expands financial statement disclosures regarding fair
value measurements. SFAS No. 157 applies only to fair value
measurements that already are required or permitted by other accounting
standards and does not require any new fair value measurements. In February 2008,
the FASB issued FASB Staff Position (FSP) No. 157-2 (FSP No. 157-2),
which delayed the effective date of SFAS No. 157 until the first quarter
of 2009 for nonfinancial assets and liabilities that are not recognized or
disclosed at fair value in the financial statements on a recurring basis.
During the first quarter we adopted the provisions of SFAS No. 157 related
to our nonfinancial assets and liabilities that include goodwill, intangible
assets and property, plant and equipment, and it did not have a material impact
on our nonfinancial assets and liabilities in the first quarter.

In October 2008, the
FASB issued FSP No. FAS 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active (FAS 157-3),
which clarifies the application of Statement No. 157 in an inactive market
and illustrates how an entity would determine fair value when the market for a
financial asset is not active. The Staff Position is effective immediately and
applies to prior periods for which financial statements have not been issued,
including interim or annual periods ending on or before September 30,
2008. The implementation of FAS 157-3 did not have a material impact on our
consolidated financial position, results of operations and cash flows.

In accordance with the
provisions of SFAS No. 157, Caliper measures fair value at the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
The Statement prioritizes the assumption that market participants would use in
pricing the asset or liability (the inputs) into a three-tier fair value
hierarchy. This fair value hierarchy gives the highest priority (Level 1)
to quoted prices in active markets for identical assets or liabilities and the
lowest priority (Level 3) to unobservable inputs in which little or no market
data exists, requiring companies to develop their own assumptions.
Observable inputs that do not meet the criteria of Level 1, and include quoted
prices for similar assets or liabilities in active markets or quoted prices for
identical assets and liabilities in markets that are not active, are
categorized as Level 2. Level 3 inputs are those that reflect our
estimates about the assumptions market participants would use in pricing the
asset or liability, based on the best information available in the
circumstances. Valuation techniques for assets and liabilities measured
using Level 3 inputs may include methodologies such as the market approach, the
income approach or the cost approach, and may use unobservable inputs such as
projections, estimates and managements interpretation of current market
data. These unobservable inputs are only utilized to the extent that
observable inputs are not available or cost-effective to obtain.

On March 31, 2009,
Calipers investments were valued in accordance with the fair value hierarchy
as follows (in thousands):

Total
Fair

Value

Quoted

Prices
in

Active

Markets

(Level
1)

Observable

Inputs

(Level
2)

Unobservable

Inputs

(Level
3)

Money
market funds

$

8,583

$

8,583

$



$



Commercial
paper

4,048



4,048



U.S.
corporate notes and bonds

1,204



1,204



Other

2,570



2,570



Total

$

16,405

$

8,583

$

7,822

$



Investments are generally
classified Level 1 or Level 2 because they are valued using quoted market
prices, broker or dealer quotations, market prices received from industry
standard pricing data providers or alternative pricing sources with reasonable
levels of price transparency. Investments in U.S. Treasury Securities and
overnight Money market Mutual Funds have been classified as Level 1 because
these securities are valued based upon quoted prices in active markets or
because the investments are actively traded.

Caliper held five
positions in debt securities that were in an unrealized loss position as of March 31,
2009. During the three months ended March 31, 2009, a total
unrealized loss of $22,000 was recorded to accumulated other comprehensive
income within the accompanying balance sheet. Based on Calipers
evaluation of its investments, management does not believe any individual
unrealized loss at March 31, 2009 represents an other-than-temporary
impairment as these unrealized losses are primarily attributable to changes in
the interest rates and the ongoing credit crisis which has created volatile
market conditions. Caliper currently has both the intent and ability to hold
the securities for a time necessary to recover the amortized cost.

Caliper accounts for
income taxes in accordance with FAS 109,
Accounting for Income Taxes, and accounts for uncertainty in income
taxes recognized in financial statements in accordance with FIN 48, Accounting for Uncertainty in Income Taxes (FIN 48).
FIN 48 prescribes a comprehensive model for the recognition,
measurement, and financial statement disclosure of uncertain tax positions.
Unrecognized tax benefits are the differences between tax positions taken, or
expected to be taken, in tax returns, and the benefits recognized for
accounting purposes pursuant to FIN 48. Caliper classifies uncertain tax
positions as short-term liabilities within accrued expenses. During the
three month period in each of 2009 and 2008, Calipers tax provisions primarily
relate to foreign taxes in jurisdictions where its wholly owned subsidiaries
are profitable.

In accordance with
SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and
Other Intangible Assets, goodwill and certain other intangibles are not
amortized but are instead subject to periodic impairment assessments. Caliper
performs a test for the impairment of goodwill annually following the related
acquisition, or more frequently if events or circumstances indicate that
goodwill may be impaired. Because Caliper has a single operating segment which
is the sole reporting unit, Caliper performs this test by comparing the fair
value of Caliper with its carrying value, including goodwill. If the fair value
exceeds the carrying value, goodwill is not impaired. If the book value exceeds
the carrying value, Caliper would calculate the potential impairment loss by
comparing the implied fair value of goodwill with the book value of goodwill.
If the implied fair value of goodwill is less than the book value, an
impairment charge would be recorded equal to the difference. Caliper recorded a
goodwill impairment charge of $43.4 million in 2008, as described more
fully in Note 7 to our consolidated financial statements in our Annual
Report on Form 10-K for the year ended December 31, 2008 filed with
the SEC on March 13, 2009.

As of March 31, 2009, Caliper analyzed its
goodwill for indicators of impairment.
There were no indicators, other than the fact Calipers fair value was
less than its book value. Caliper
completed an assessment of the implied fair value of its goodwill in
connection with the audit of its 2008 financial statements, as more fully
described in Note 7 to the consolidated financial statements in the Companys
Annual Report on Form 10-K for the fiscal year ended December 31,
2008. Due to the fact Calipers stock
price has remained relatively consistent as of March 31, 2009 compared to December 31,
2008 and Caliper achieved its planned financial results within the quarter, it
believes there is not an impairment within the period.

In December 2007,
the FASB issued SFAS No. 141(R) (SFAS 141R), Business Combinations. This Standard will
require an acquiring company to measure all assets acquired and liabilities
assumed, including contingent considerations and all contractual contingencies,
at fair value as of the acquisition date. In addition, an acquiring company is
required to capitalize IPR&D and either amortize it over the life of the
product, or write it off if the project is abandoned or impaired. The Standard
is effective for transactions occurring on or after January 1, 2009.

In
April 2009, the FASB issued Staff Position No. 107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial
Instruments, effective for interim and annual periods ending after June 15,
2009. The staff position requires fair value disclosures of financial
instruments on a quarterly basis, as well as new disclosures regarding the
methodology and significant assumptions underlying the fair value measures and
any changes to the methodology and assumptions during the reporting period.
Caliper will apply the disclosure provisions as appropriate in future filings.

On October 29, 2008,
Caliper entered into an Asset Sale and Purchase Agreement (the Purchase
Agreement) with Sotax Corporation (Sotax), a Virginia corporation and a
privately owned subsidiary of SOTAX Holding A.G. based in Switzerland. The
Purchase Agreement provided for the sale of Calipers Pharmaceutical
Development and Quality (PDQ) product line to Sotax for a purchase price of
approximately $15.8 million, including $13.8 million in cash together
with certain assumed liabilities upon closing which were approximately
$2.0 million (the Purchase Price). In addition, $1.0 million of the
Purchase Price was placed into an escrow account until the first anniversary of
November 10, 2008, the closing date. The escrow secures Calipers
indemnification obligations to Sotax, if any, under the Purchase Agreement. The
Purchase Agreement also contains representations, warranties and indemnities
that are customary in asset sale transactions. Caliper realized approximately
$12.6 million in net cash proceeds from the sale of its PDQ product line
upon closing, after the escrow account deposit and transaction expenses. As
part of this transaction, Caliper sold approximately $0.5 million in net
assets, which consisted primarily of inventory net of deferred revenue and
accrued expenses. Caliper recorded a $1.4 million gain on the sale of the PDQ
product line based upon the net proceeds in excess of total divested net
assets, which included $10.5 million of goodwill that was allocated to the
product line on a relative fair value basis.
During the three months ended March 31, 2008 there was $2.2 million
in revenue attributable to the PDQ product line in the accompanying statement
of operations.

On November 10,
2008, Caliper entered into an Asset Purchase Agreement (the Asset Purchase
Agreement) with Dionex Corporation (Dionex), a publicly traded Delaware
corporation. The Asset Purchase Agreement provided for the sale of Calipers
AutoTrace product line to Dionex for a purchase price of approximately
$5.0 million. As part of this transaction, Caliper sold approximately
$0.3 million in net assets, which consisted primarily of inventory net of
deferred revenue and accrued expenses. Caliper recorded a $0.7 million gain on
the sale of the AutoTrace product line based upon the net proceeds in excess of
total divested net assets, which included $3.8 million of goodwill that
was allocated to the product line on a relative fair value basis. During
the three months ended March 31, 2009 and 2008 there was $0.3 million and
$0.7 million, respectively, in revenue attributable to the AutoTrace product
line in the accompanying statement of operations. The $0.3 million of 2009 revenue included
remaining revenues associated with the transition services arrangement that
ended during the quarter.

Inventories are stated at
the lower of cost (determined on a first-in, first-out basis, or FIFO) or
market. Amounts are relieved from inventory and recognized as a component of
cost of sales on a FIFO basis. Inventories consist of the following (in
thousands):

Caliper provides for
estimated warranty expenses as a component of cost of revenue at the time
product revenue is recognized in accordance with FAS 5, Accounting
for Contingencies, and FASB
Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others. Caliper offers a
one-year limited warranty on most products, which is included in the selling
price. Calipers standard limited warranty covers repair or replacement of
defective goods, a preventative maintenance visit on certain products, and telephone-based
technical support. Factors that affect Calipers warranty liability include the
number of installed units, historical and anticipated rates of warranty claims,
and cost per claim. Caliper periodically assesses the adequacy of its recorded
warranty liabilities and adjusts amounts as necessary.

Changes in Calipers
warranty obligation are as follows (in thousands):

Calipers accrued
restructuring costs as of March 31, 2009 were comprised of future
contractual obligations pursuant to facility operating leases covering certain
idle space as further described below.
The following table summarizes changes in accrued restructuring
obligations during the three months ended March 31, 2009 (in thousands):

Total

Balance,
December 31, 2008

$

4,476

Restructuring
charge



Adjustments
to estimated obligations

(4

)

Interest
accretion

23

Payments

(470

)

Balance,
March 31, 2009

$

4,025

The remaining facility
obligations are payable as follows (in thousands):

Years Ended December 31:

2009
(remainder of fiscal year)

$

1,462

2010

1,781

2011

421

2012

433

2013

406

Total
minimum payments

4,503

Less:
Amount representing interest

(478

)

Present
value of future payments

4,025

Less:
Current portion of obligations

1,818

Non-current
portion of obligations

$

2,207

The restructuring
obligations reflected above resulted from the following actions:

During
the first quarter of 2008, Caliper initiated the consolidation of its West
Coast business operations to reduce overall facility costs and improve
productivity and effectiveness of its research and development spending. The
consolidation plan entailed vacating approximately 36,500 square feet of
currently occupied space in Mountain View, California, which was completed in September 2008.
This facility closure was accounted for in accordance with SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities,
pursuant to which Caliper recorded a liability equal to the fair value of the
remaining lease payments as of the cease-use date. Fair value was determined
based upon the discounted present value of remaining lease rentals (using a
discount rate of 5.5%) for the space no longer occupied, considering future
estimated sublease income, estimated broker fees and required tenant
improvements. Caliper calculated the fair value as $4.6 million and
recorded this amount within restructuring charges in the second half of fiscal
2008. The lease term expires November 30,
2013.

Caliper
also assumed a $1.0 million obligation related to Xenogens
St. Louis, Missouri facility. The facility closure was previously
accounted for by Xenogen in accordance with EITF 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring). The fair value of the assumed
obligation was determined based upon the discounted present value of remaining
lease rentals (using a discount rate of 8.75%) for the space no longer occupied,
net of sublease income expected to be derived from the property. The lease term
expires April 30, 2011.

On March 6, 2009,
Caliper entered into the Credit Facility which permits Caliper to borrow up to
$25 million in the form of revolving loan advances, including up to
$5 million in the form of letters of credit. Principal borrowings under the Credit
Facility accrue interest at a floating annual rate equal to the Base Rate (as
hereafter defined) plus one percent if Calipers unrestricted cash held at the
bank exceeds or is equal to $20 million, or the Base Rate plus two percent if
Calipers unrestricted cash held at the bank is below $20 million. The Base Rate is the greater of: (i) the banks announced prime rate
and (ii) four and one-half of one percent (4.5%). Under the Credit Facility, Caliper is
permitted to borrow up to $25 million, subject to a borrowing base limit
consisting of (a) 80% of eligible accounts receivable plus (b) the
lesser of 70% of Calipers unrestricted cash at the bank or $12 million;
provided that on each of the first three business days and each of the last
three business days of each fiscal quarter, the borrowing base is (a) 80%
of eligible accounts receivable plus (b) the lesser of 90% of Calipers
unrestricted cash at the bank or $12 million. Eligible accounts receivable do
not include internationally billed receivables, unbilled receivables, and
receivables aged over 90 days from invoice date. The Credit Facility
matures on November 30, 2010. The
Credit Facility serves as a source of capital for ongoing operations and
working capital needs.

The Credit Facility
includes customary lending and reporting covenants, including certain financial
covenants regarding Calipers required levels of liquidity and earnings that
are tested as of the last day of each quarter.
As of March 31, 2009, Caliper was in compliance with its
covenants. The Credit Facility also
includes a net liquidity clause. Under
this clause, if Calipers total cash, cash equivalents and marketable
securities, held at the bank, net of debt outstanding under the Credit
Facility, are less than $0.5 million (the Net Liquidity Limit), the bank will
apply all of Calipers accounts receivable collections, received within its
lockbox arrangement with the bank to the outstanding principal. Such amounts would be eligible to be
re-borrowed by Caliper subject to the borrowing base limit. Based on Calipers current forecast, it
expects to fall below the Net Liquidity Limit at certain times during the
second half of 2009.

The Credit Facility also
includes certain rights for the bank to accelerate the maturity of the debt,
modify the borrowing base or stop making advances, upon the occurrence of
certain customary events of default, some of which may be viewed as
determinable based on the Banks discretion.
Caliper does not believe the bank will exercise these rights as long as
Caliper is meeting its covenants and achieving its forecast. The Credit Facility also includes customary
events of default, such as payment default, material adverse change conditions
and insolvency conditions that could cause interest to be charged at the
interest rate in effect as of the date of default plus two percentage points,
or in the event of any uncured events of default (including non-compliance with
liquidity and earnings financial covenants), that could result in the banks
right to declare all outstanding obligations immediately due and payable. Should an event of default occur, including
the occurrence of a material adverse change, and based on such default the bank
were to declare all outstanding obligations immediately due and payable,
Caliper may be required to significantly reduce its costs and expenses, sell
additional equity or debt securities, or restructure portions of its business
which could involve the sale of certain business assets. In such case, the sale of additional equity
or convertible debt securities may result in additional dilution to Calipers
stockholders. Furthermore, additional
capital may not be available on terms favorable to Caliper, if at all. In this circumstance, if Caliper could not
significantly reduce its costs and expenses, obtain adequate financing on
acceptable terms when such financing is required or restructure portions of its
business, Calipers business would be adversely affected. In addition, the amount of available capital
that Caliper is able to access under the Credit Facility at any particular time
is dependent upon the borrowing base formula, which relies on the ability of
its business to generate accounts receivable that are eligible according to the
Credit Facility. If economic conditions
worsen and its business performance is not as strong as anticipated, then
Caliper could experience an event of default or a reduction in borrowing
capacity under the Credit Facility, which if not cured to the banks satisfaction,
could potentially have a material adverse impact on its ability to access
capital under its Credit Facility in order to fund 2009 operations. If such events were to occur, Calipers
business would be adversely affected.

Outstanding obligations
under the Credit Facility were $14.9 million as of March 31, 2009. The Credit Facility is classified as
short-term consistent with Calipers intent to utilize the Credit Facility to
fund operations and working capital needs on a revolving loan basis, including
the mechanics of the Net Liquidity Limit described above. Interest is due monthly and has ranged from
3.75% to 8.75% in 2009 and 2008. At March 31,
2009, Caliper had approximately $5.7 million of additional amounts that it
could borrow based on the borrowing formula.

Commencing on June 7,
2001, Caliper and three of its then officers and directors (David V. Milligan,
Daniel L. Kisner and James L. Knighton) were named as defendants in three
securities class action lawsuits filed in the United States District Court for
the Southern District of New York. The cases have been consolidated under the
caption, In re Caliper Technologies Corp. Initial Public Offering Securities
Litigation, 01 Civ. 5072 (SAS) (GBD). Similar complaints were filed against
approximately 300 other public companies that conducted initial public
offerings of their common stock during the late 1990s (the IPO Lawsuits). On August 8,
2001, the IPO Lawsuits were consolidated for pretrial purposes before United
States Judge Shira Scheindlin of the Southern District of New York. Together,
those cases are denominated In re Initial Public Offering Securities
Litigation, 21 MC 92(SAS). On April 19, 2002, a Consolidated Amended
Complaint was filed alleging claims against Caliper and the individual
defendants under Sections 11 and 15 of the Securities Act of 1933, and
under Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, as well as Rule 10b-5 promulgated thereunder. The Consolidated
Amended Complaint also names certain underwriters of Calipers December 1999
initial public offering of common stock as defendants. The Complaint alleges
that these underwriters charged excessive, undisclosed commissions to investors
and entered into improper agreements with investors relating to aftermarket
transactions. The Complaint seeks an unspecified amount of money damages.
Caliper and the other issuers named as defendants in the IPO Lawsuits moved on July 15,
2002, to dismiss all claims on multiple grounds. By Stipulation and Order dated
October 9, 2002, the claims against Messrs. Milligan, Kisner and
Knighton were dismissed without prejudice. On February 19, 2003, the Court
granted Calipers motion to dismiss all claims against it. Plaintiffs were not
given the right to replead the claims against Caliper. The time to appeal the
dismissal has not yet expired. In March 2009, all of the plaintiffs,
underwriters and issuers involved in this litigation entered into a new global
settlement agreement. This settlement
agreement is still subject to approval by Judge Scheindlin, and will not be
considered final until this approval is obtained. The hearing for final approval of the
settlement has not yet been scheduled. The settlement agreement, if approved by
Judge Scheindlin, will provide Caliper with a release of all claims against it,
and will not require any payments from Caliper. The final resolution of this
litigation is not expected to have a material impact on Caliper.

On January 23, 2009,
Caliper filed and served a patent infringement suit against Shimadzu
Corporation and its U.S. subsidiary, Shimadzu Scientific Instruments, Inc.,
in the United States District Court for the Eastern District of Texas. The
complaint was

promptly served upon
Shimadzus U.S. subsidiary. In this
suit, Caliper alleges that Shimadzus MCE-202 MultiNA instrument system, which
performs electrophoretic separations analysis of nucleic acids, infringes 11
different U.S. patents owned by Caliper. Shimadzu filed an answer to this
complaint on March 24, 2009. In its
answer, Shimadzu denied infringement of any valid claim of any of the 11
patents asserted against Shimadzu by Caliper, and alleged that each patent
asserted by Caliper is invalid and/or unenforceable. A scheduling conference for this litigation
has been scheduled for no later than May 8, 2009.

From time to time Caliper
is involved in litigation arising out of claims in the normal course of
business, and when a probable loss contingency arises, records a loss provision
based upon actual or possible claims and assessments. The amount of possible
claim recorded is determined on the basis of the amount of the actual claim,
when the amount is both probable and the amount of the claim can be reasonably
estimated. If a loss is deemed probable, but the range of potential loss is
wide, Caliper records a loss provision based upon the low end estimate of the
probable range and may adjust that estimate in future periods as more
information becomes available. Litigation loss provisions, when made, are
reflected within general and administrative expenses in the Statement of
Operations and are included within accrued legal expenses in the accompanying
balance sheet. Based on the information presently available, management
believes that there are no outstanding claims or actions pending or threatened
against Caliper, the ultimate resolution of which will have a material adverse
effect on our financial position, liquidity or results of operations, although
the results of litigation are inherently uncertain, and adverse outcomes are
possible.

Caliper accounts for
stock-based compensation in accordance with Statement of Financial Accounting
Standard No. 123R, Share-Based Payment
(SFAS 123R), which requires all share-based payments, including
grants of stock options, to be recognized in the income statement as an
operating expense, based on their fair values. Caliper estimates the fair value
of each option award on the date of grant using a Black-Scholes-Merton based option-pricing
model.

Stock-based compensation
expense is included within costs and expenses as follows (in thousands):

Three Months Ended

March 31,

2009

2008

Cost
of product revenue

$

78

$

81

Cost
of service revenue

15

21

Research
and development

129

93

Selling,
general and administrative

693

815

Total

$

915

$

1,010

On March 31, 2009,
Caliper had five share-based compensation plans (the Plans), which are
described within Note 12 to the consolidated financial statements included
in the Companys Annual Report on Form 10-K for the year ended December 31,
2008 filed with the SEC on March 13, 2009.

The fair value of each
option award issued under Calipers equity plans is estimated on the date of
grant using a Black-Scholes-Merton based option pricing model that uses the
assumptions noted in the following table. Expected volatilities are based on
historical volatility of Calipers stock. The expected term of the options is
based on Calipers historical option exercise data taking into consideration
the exercise patterns of the option holders during the options life. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect on
the date of the grant.

During the three
months ended March 31, 2009, Caliper granted its employees 1,057,000
options. Such options were valued using a Black-Scholes-Merton based option
pricing model employing the assumptions reflected above which resulted in a
weighted average grant date fair value of $0.38 per option. The total fair
value of restricted stock that vested during the three months ended March 31,
2009 was approximately $0.7 million.

As of March 31,
2009, there was $6.3 million of total unrecognized compensation cost
related to unvested stock-based compensation arrangements granted under the
Plans. That cost is expected to be recognized over a weighted-average remaining
service (vesting) period of approximately 2.4 years.

Basic net loss per share
is calculated based upon net loss divided by the weighted-average number of
common shares outstanding during the period. The calculation of diluted net
loss per share excludes common stock equivalents consisting of stock options,
unvested restricted stock, unvested restricted stock units and warrants
(calculated using the treasury stock method) which would have an anti-dilutive
effect.

The weighted average
number of shares used to compute both basic and diluted net loss per share
consists of the following (in thousands):

Three Months Ended
March 31, 2009,

2009

2008

Basic and
diluted

48,626

47,683

Anti-dilutive
common stock equivalents excluded from calculation of diluted net loss per
share (prior to the application of the treasury stock method)

This
Managements Discussion and Analysis of Financial Condition and Results of
Operations as of March 31, 2009 and for the three months ended March 31,
2009 should be read in conjunction with our financial statements included in
this Quarterly Report on Form 10-Q and Managements Discussion and
Analysis of Financial Condition and Results of Operations and our financial
statements included in our Annual Report on Form 10-K for the year ended December 31,
2008 filed with the SEC on March 13, 2009.

The
discussion in this report contains forward-looking statements that involve
risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. Our actual results could differ materially from
those discussed here. Factors that could cause or contribute to these
differences include those discussed under the caption Risk Factors below, as
well as those discussed elsewhere. The cautionary statements made in this
report should be read as applying to all related forward-looking statements
wherever they appear in this report.

Caliper develops and
sells innovative and enabling products and services to the life sciences
research community, a customer base that includes pharmaceutical and
biotechnology companies, and government and other not-for-profit research
institutions. We believe our integrated systems, consisting of instruments,
software and reagents, our laboratory automation tools and our assay and
discovery services enable researchers to better understand the basis for
disease and more effectively discover safe and effective drugs. Our strategy is
to transform drug discovery and development by offering technologies and
services that ultimately enhance the ability to predict the effects that new
drug candidates will have on humans. Our offerings leverage our extensive portfolio
of molecular imaging, microfluidics, automation and liquid handling
technologies, and scientific applications expertise to address key limitations
in the drug discovery and development processnamely, the complex and costly
process to conceive of and bring a new drug to market.

We believe that
increasing the clinical relevance of drug discovery experimentation, whether at
early stage, lower cost, in vitro (artificial environment) testing or later
stage, more expensive preclinical in vivo (in a living organism) testing, will
have a profound impact in helping our customers to determine the ultimate
likelihood of success of drugs in treating humans. We expect that our enabling
offerings in both the in vitro and in vivo testing arenas, and a unique strategy
of enhancing the bridge or linkages between in vitro, in vivo and the clinic
in order to optimize the cost of the experiment versus the clinical insight
gained, will allow us to continue to address growing, unmet needs in the market
and drive ongoing demand for our products and services. These market needs are
underscored by key challenges that face the pharmaceutical and biotechnology
industry, including late-stage drug failures and unforeseen side effects coming
to light late in the development process or after drugs are on the market.

We presently offer an
array of products and services, many based on highly enabling proprietary
technologies that address critical experimental needs in drug discovery and
preclinical development and related processes. Our technologies are also
enabling for other life sciences applications beyond drug discovery, such as
environmental-related testing, and in applied markets such as agriculture and
forensics. We also believe that our technology platforms may be able to provide
ease of use, cost and data quality benefits for certain in vitro and in vivo
diagnostic applications.

We have multiple channels
of distribution for our products: direct to customers, indirect through our
international network of distributors, through partnership channels under our
Caliper Driven program and through joint marketing agreements. Through our
direct and indirect channels, we sell products, services and complete system
solutions, developed by us, to end customers. Our Caliper Driven program is
core to our business strategy and complementary to our direct sales and
distribution network activities, as it enables us to extend the commercial
potential of our LabChip and advanced liquid handling technologies into new
industries and new applications with experienced commercial partners. We also
utilize joint marketing agreements to enable others to market and distribute
our products. By using direct and indirect distribution, and out-licensing our
technology under our Caliper Driven program, we seek to maximize penetration of
our products and technologies into the marketplace and position Caliper as a
leader in the life sciences tools market.

Our product and service
offerings are organized into three core business areasOptical Molecular Imaging
(Imaging), Discovery Research (Research), and Caliper Discovery Alliances and
Services (CDAS)with the goal of creating a more scalable infrastructure
while putting increased focus on growth and profitability.

·The Imaging business area is focused on
preclinical imaging, where Caliper holds a global leadership position in the
high growth imaging market. Principal activities of this business area include
the expansion of the IVIS imaging instrument and related reagent product lines,
development of new therapeutic area applications and facilitating additional
imaging modalities.

·The Research business area is responsible
for utilizing Calipers core automation and microfluidic technologies to
address an expanding array of opportunities in drug discovery and life science
research, including molecular biology sample preparation

·The CDAS business area is responsible for
expanding drug discovery collaborations and alliances, and increasing sales of
drug discovery services. The focus of CDAS is to capitalize on market outsourcing
trends and to maximize the large contract opportunity with the Environmental
Protection Agency under its ToxCast® screening program.

Our revenues during the
three months ended March 31, 2009 were $28.5 million compared to $29.3
million for the three months ended March 31, 2008. In comparing our
first quarter performance in 2009 to the same period in 2008, it is important
to take into account the effect of the divestitures of our PDQ and AutoTrace
product lines that occurred in the fourth quarter of 2008. On an organic growth basis (i.e., excluding
the effects of the divested product lines and exchange rate fluctuations upon
revenues), we experienced growth of 11% in the first quarter of 2009 compared
to the same period in 2008. We believe
that this strong quarter-on-quarter growth comparison benefited, in part, from
a favorable timing of orders as a result of customer demand that was held back
due to widespread market uncertainties in 2008, as well as from unanticipated
service orders within our CDAS business.

During the three
months ended March 31, 2009, the effect on revenues related to foreign
exchange resulted in a 4% unfavorable impact as compared to the prior
year. The effect of foreign exchange on net loss was less than 1% due to
offsetting foreign denominated expenses.

The table below provides
a reconciliation of our GAAP basis revenue to pro forma revenue results for the
quarters ended March 31, 2009 and 2008, after giving effect to our
divestures of the PDQ and AutoTrace product lines during the fourth quarter of
2008. We believe this is a useful measure in evaluating revenue performance
between comparative periods; however, these non-GAAP comparisons are not
intended to substitute for GAAP financial measures.

Quarter
Ended March 31,

Non-GAAP
Adjustments (1)

GAAP

(in thousands)

Non-GAAP

GAAP

Non-GAAP

2009

2008

2009

2008

2009

2008

% Chg

% Chg

Research

$

13,521

$

14,980

$

(343

)

$

(2,893

)

$

13,178

$

12,087

(10

)%

9

%

Imaging

10,741

9,774





10,741

9,774

10

%

10

%

CDAS

4,210

4,533





4,210

4,533

(7

)%

(7

)%

Total Revenue

$

28,472

$

29,287

$

(343

)

$

(2,893

)

$

28,129

$

26,394

(3

)%

7

%

(1)

For purposes of
comparing growth rates for each of the three principal areas of our business,
the above non-GAAP table reconciliations exclude revenues related to the PDQ
and AutoTrace product lines divested in November 2008. The $0.3 million
of first quarter 2009 revenue included remaining revenues associated with the
AutoTrace product line in the early part of the quarter. We anticipate no
further revenue from either of the former PDQ or AutoTrace product lines
after March 31, 2009.

Research revenues
associated with ongoing product lines (i.e., excluding revenue of divested
product lines), comprised primarily of microfluidics and laboratory automation
products and services, increased by 9% on a non-GAAP basis, to $13.2 million
during the first quarter of 2009 from $12.1 million during the first quarter of
2008. This increase included a 6%
unfavorable impact as a result of currency translation based upon currency
rates in effect during the first quarter of 2009 compared to the first quarter
of 2008. Research growth was strong, primarily due to sales of our proprietary
LabChip GX instrument, which we believe is the best-in-class proprietary
solution for characterizing proteins in the fast growing biologics market, and
increased sales of our Profiler Pro reagent plates, which are consumable
products used for kinase screening in connection with our EZ Reader instrument.

Imaging revenues
increased by 10%, to $10.7 million during the first quarter of 2009 from $9.8
million during the first quarter of 2008.
This increase included a 5% unfavorable impact from foreign currency
translation compared to the first quarter of 2008. Imaging growth was driven by continued strong
global demand for our IVIS instruments and accessories, reagents and services.

CDAS revenues
decreased by 7% to $4.2 million during the first quarter of 2009 from $4.5
million during the first quarter of 2008. The net decrease resulted from a
decrease in in vitro services revenues partially
offset by in vivo services revenue
improvement. We anticipate revenue from
CDAS services to grow over the second half of 2009 based on our expectation
that our CDAS unit will receive an additional task order under the
Environmental Protection Agencys ToxCast program.

Total gross margin
decreased by approximately 1% during the first quarter of 2009 compared to the
same period in 2008 primarily due to the overall service revenue decline which
resulted primarily from the product lines that were divested in the fourth
quarter of 2008.

Operating expenses (research and development plus
selling, general and administrative expenses) decreased by 19% to $15.7 million
during the first quarter of 2009 from $19.5 million in the first quarter of
2008. This reduction included $2.8
million of selling,

general and
administrative expense reduction and $1.0 million of research and development
expense reduction resulting from streamlining and cost-reduction initiatives
implemented over 2008. Of the overall
reduction, approximately $0.6 million related to the divested product lines and
effects of exchange rate movements.

Net loss narrowed by $3.3 million, or 33%, to $6.6
million ($0.14 per share) during the first quarter of 2009 from $9.9 million ($0.21
per share) during the first quarter of 2008.
The overall reduction in net loss reflected the benefit of cost
reductions implemented in 2008 to coincide with our strategic reconfiguration
around our high growth proprietary products and services.

Critical Accounting Policies and Estimates

The critical accounting
policies that we believe impact significant judgments and estimates used in the
preparation of our consolidated financial statements presented in this report
are described in our Managements Discussion and Analysis of Financial
Condition and Results of Operations and in the Notes to the Consolidated
Financial Statements, each included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2008 filed with the SEC on March 13,
2009.

Operating results for the
three months ended March 31, 2009 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009. For
example, we typically experience higher revenues in the fourth quarter of our
fiscal year as a result of the capital spending patterns of our customers.

Revenue

Three Months Ended
March 31,

(In thousands)

2009

2008

$ Change

% Change

Product revenue

$

18,309

$

17,665

$

644

4

%

Service revenue

7,657

9,008

(1,351

)

(15

)%

License fees and
contract revenue

2,506

2,614

(108

)

(4

)%

Total Revenues

$

28,472

$

29,287

$

(815

)

(3

)%

Product
Revenue. Product revenue increased $0.6 million during the
three months ended March 31, 2009, compared to the same period in 2008 due
primarily to strong imaging and microfluidic instrument and consumable
sales. Imaging product sales increased
by $0.8 million, or approximately 12%, compared to the first quarter of
2008. This increase was due to a 19% increase in IVIS instrument
placements compared to the first quarter of 2008. The IVIS instrument product
mix during the quarter was more heavily comprised of lower-priced IVIS Lumina
instruments, resulting in a lower average selling price.
Research product sales decreased $0.2 million, or 2%, during the first
quarter of 2009 compared to the same quarter in 2008. This decrease was a net result of $1.3
million of product revenue for the first quarter of 2008 related to divested
product lines, partially offset by a $1.1 million net revenue increase in the
first quarter of 2009 from ongoing product lines. This $1.1 million net increase was made up of
(a) sales increases in our LabChip GX and LabChip GXII microfluidic
benchtop instruments (the LabChip GX series) which were launched in July 2008
in response to strong market demand for systems capable of performing fast,
automated, 1-D electrophoretic separations of protein, DNA, and RNA samples, (b) continued
growth in revenues from microfluidic consumables (chips, kits and reagents)
within our direct and original equipment manufacturer (OEM) channels, and (c) a
last time purchase by an automation OEM partner. These increases were partially
offset by sales decreases caused by (a) reduced instrument sales of our
TurboVap product line primarily within our European distribution channel, and (b) a
shortfall in liquid handling instrument sales and OEM Twister sales within the
period.

Service
Revenue. Service
revenue decreased during the three months ended March 31, 2009, compared
to the same period in 2008 primarily from $1.2 million in service contract and
billable revenue associated with the divested PDQ and AutoTrace product
lines. The remaining decline consisted of
a $0.1 million decrease in all other instrument services and a $0.1 million
decrease in CDAS service revenues. CDAS
service revenues were down on a net basis in the first quarter of 2009 as
compared to the same period in 2008 and within this minor net change were
decreases of $0.9 million related to in vitro government contracts, with the
majority of the decline related to a contract that ended in 2008, and a $0.5
million decrease in in vitro and in vivo standard service offerings by the CDAS
business. These CDAS revenue decreases
were partially offset by a $0.6 million increase in phenotyping revenue related
to a single customer contract that experienced contractual delays over the
first half of 2008, and $0.7 million related to new in vitro screening contracts
with a single customer.

License
Fees and Contract Revenue. License fees and contract
revenue decreased during the three months ended March 31, 2009 compared to
the same period in 2008 primarily as a result of CDAS in vitro Small Business
Innovation Research grants to the CDAS business which ended in August 2008. All other license fees and royalties
increased $0.1 million during the quarter.

Cost
of Product Revenue. Cost
of product revenue increased slightly during the three months ended March 31,
2009 as a result of the overall increase in product sales. The increase is primarily as a result of an
increase in warranty parts and other variable manufacturing costs, as a
percentage of sales, by approximately 400 basis points, or $0.8 million. This increase was offset in part by reduced
material cost spending as a percentage of sales resulting from mix and a $0.1
million decrease in overall manufacturing spending comprised primarily of
reduced labor costs incurred with respect to manufacturing operations.

Cost
of Service Revenue. Cost
of service revenue decreased during the three months ended March 31, 2009
as compared to the same period in 2008 primarily as a result of headcount
reductions resulting from divested product lines and the strategic business
unit consolidation we implemented in the third quarter of 2008.

Cost
of License Revenue. Cost
of license revenue increased during the three months ended March 31, 2009
compared to the same period in 2008 due primarily to an increase in a
microfluidic contractual royalty obligation with a third party.

Gross
Margins. Gross
margin on product revenue was 39% for the three months ended March 31,
2009 which was an increase of 200 basis points compared to the same period in
2008, reflecting the effect of incremental margin contribution associated with
increased sales volumes and improved product mix, partially offset by higher
material and other variable costs incurred. Gross margin on service
revenue was 25% for the three months ended March 31, 2009 as compared to
32% for the same period in 2008. This decreased service margin resulted
primarily from the reduced leverage of the service contract and billable
revenues related to the divested product lines.

Research
and Development Expenses. Research and development spending decreased by
$1.0 million during the three months ended March 31, 2009 compared to the
same period in 2008 primarily as a result of a reduction in personnel-related
costs of $0.3 million, relating to the consolidation and cost reduction efforts
initiated in 2008, a $0.4 million reduction in severance costs which related to
actions taken in the first quarter of 2008, and $0.3 million in reduced
material and operating supplies.

Selling,
General and Administrative Expenses. Selling, general and
administrative expenses decreased by $2.7 million during the three months
ended March 31, 2009 compared to the same period in 2008 due to equal
reductions in both general selling and marketing expenses and general and
administrative expenses. Selling and marketing expenses decreased by $1.4
million during the three months ended March 31, 2009 as compared to the
same period in 2008 primarily due to a $0.7 million reduction in salaries and
related costs due to reduced headcount from the divested product lines as well
as cost reduction initiatives in 2008 to align our business along strategic
business units, a $0.3 million reduction in travel and related costs and a
reduction of $0.4 million in all other costs.
General and administrative expenses decreased by $1.3 million during the
three months ended March 31, 2009 as compared to the same period in 2008
primarily due to a $0.5 million reduction in legal costs as a result of
litigation that was settled in the first quarter of 2008, a $0.2 million
reduction in salaries and related costs, $0.2 million in reduced severance
related primarily to the consolidation of responsibilities within our finance
department, and a $0.4 million reduction in all other costs.

Amortization
of Intangible Assets. The amortization of intangible assets for the three months
ended March 31, 2009 relates to assets acquired in our previous business
combinations. Amortization is computed based upon the estimated timing of the
undiscounted cash flows used to value each respective asset over the estimated
useful life of the particular intangible asset, or using the straight-line
method over the estimated useful life of the intangible asset when the pattern
of cash flows is not necessarily reflective of the true consumption rate of the
particular intangible asset. The decrease in amortization during the
three months ended March 31, 2009 is the

result of certain
intangibles from our acquisition of Zymark Corporation in July 2003 that
had a five-year life and therefore were fully amortized as of July 13,
2008.

Restructuring
Charges. We
incurred restructuring charges in 2008 and prior periods related to acquisition
and integration activities that are more fully discussed in Note 7 to the
accompanying financial statements. Other restructuring charges during the
three months ending March 31, 2009 and 2008 relate to accretion of
interest related to idle facility rent obligations.

Interest
Expense, Net. Net
interest expense increased during the three months ended March 31, 2009
compared to the same period in 2008 as a result of lower interest income due to
reduced yield rates on our investments.

Other
Income (Expense), Net. Other income (expense), net, decreased on a
three-month basis compared to 2008 due to transaction losses on foreign
denominated accounts receivable resulting from a stronger U.S. dollar in
comparison to primarily the Euro and the British Pound. During the three months
ended March 31, 2009, we incurred foreign currency transaction losses of
approximately $0.2 million, compared to gains of approximately $0.4
million for the same period in 2008.

As of March 31,
2009, we had $23.8 million in cash, cash equivalents and marketable
securities, as compared to $26.7 million as of December 31, 2008.

On
March 6, 2009, we entered into the Credit Facility, which permits us to
borrow up to $25 million in the form of revolving loan advances, including
up to $5 million in the form of letters of credit. Principal borrowings
under the Credit Facility accrue interest at a floating annual rate equal to
the Base Rate (as hereafter defined) plus one percent if our unrestricted cash
held at the bank exceeds or is equal to $20 million, or the Base Rate plus
two percent if our unrestricted cash held at the bank is below
$20 million. The Base Rate is the
greater of: (i) the banks
announced prime rate and (ii) four and one-half of one percent
(4.5%). Under the Credit Facility, we
are permitted to borrow up to $25 million, subject to a borrowing base
limit consisting of (a) 80% of eligible accounts receivable plus (b) the
lesser of 70% of our unrestricted cash at the bank or $12 million;
provided that on each of the first three business days and each of the last
three business days of each fiscal quarter, the borrowing base is (a) 80%
of eligible accounts receivable plus (b) the lesser of 90% of our
unrestricted cash at the bank or $12 million. Eligible accounts receivable
do not include internationally billed receivables, unbilled receivables, and
receivables aged over 90 days from invoice date. The Credit Facility
matures on November 30, 2010. As of March 31, 2009, $14.9 million
was outstanding under the Credit Facility. The Credit Facility serves as a
source of capital for ongoing operations and working capital needs.

The
Credit Facility includes customary lending and reporting covenants, including
certain financial covenants regarding our required levels of liquidity and
earnings that are tested as of the last day of each quarter. The Credit
Facility also includes a net liquidity clause.
Under this clause, if our total cash, cash equivalents and marketable
securities held at the bank, net of debt outstanding under the Credit Facility,
are less than $0.5 million (the Net Liquidity Limit), then the bank will
apply all of our accounts receivable collections, received within our lockbox
arrangement with the bank, to the outstanding principal. Such amounts would be
eligible to be re-borrowed by us subject to the borrowing base limit. Based on
our current forecast, we expect to fall below the net liquidity limit at
certain times during the second half of 2009. As of March 31, 2009, we
were in compliance with our covenants. We expect to remain in compliance with
the covenants through the Credit Facilitys maturity date based on current
forecasts.

The
Credit Facility also includes certain rights for the bank to accelerate the
maturity date of the debt, modify the borrowing base or stop making advances
upon the occurrence of certain customary events of default, some of which may
be viewed as determinable based on the Banks discretion. We do not believe the
bank will exercise these rights as long as we are meeting our covenants and are
achieving our forecasts. The Credit Facility also includes customary events of
default such as payment default, material adverse change conditions and
insolvency conditions that could cause interest to be charged at the interest
rate in effect as of the date of default plus two percentage points, or in the
event of any uncured events of default (including non-compliance with liquidity
and earnings financial covenants), that could result in the banks right to
declare all outstanding obligations immediately due and payable. Should an
event of default occur, including the occurrence of a material adverse change,
and based on such default the bank were to either (i) declare all
outstanding obligations immediately due and payable, (ii) reduce our
borrowing base, or (iii) stop making credit advances to us, we may be
required to significantly reduce our costs and expenses, sell additional equity
or debt securities, or restructure portions of our business which could involve
the sale of certain assets. In such case, the sale of additional equity or
convertible debt securities may result in additional dilution to our
stockholders. We believe, based on our
current projections that the

bank will continue to
lend to us subject to the terms and conditions of the Credit Facility.
Furthermore, additional capital may not be available on terms favorable to us,
if at all. In this circumstance, if we could not significantly reduce our costs
and expenses, obtain adequate financing on acceptable terms when such financing
is required or restructure portions of our business, our business would be
adversely affected. In addition, the amount of available capital that we are
able to access under the Credit Facility at any particular time is dependent
upon the borrowing base formula, which relies on the ability of our business to
generate accounts receivable that are eligible according to the Credit
Facility. If economic conditions worsen and our business performance is weaker
than anticipated, then we could experience an event of default or a reduction
in borrowing capacity under the Credit Facility, which if not cured to the banks
satisfaction, could have a material adverse impact on our ability to access
capital under our Credit Facility in order to fund 2009 operations. If such
events were to occur, our business would be adversely affected.

We
believe our cash balance, working capital on hand at March 31, 2009 and
access to available capital under our Credit Facility will be sufficient to
fund continuing operations through at least January 1, 2010. Nevertheless,
our actual cash needs could vary considerably, depending on opportunities and
circumstances that arise over time. If, at any time, cash generated by
operations is insufficient to satisfy our liquidity requirements, we may need
to reduce our costs and expenses, sell additional equity or debt securities or
draw down on our current Credit Facility if we have borrowing capacity. The
inability to obtain additional financing may force other actions such as the
sale of certain assets, or, ultimately, cause us to cease operations.

On
November 21, 2007, we filed, and the SEC subsequently declared effective,
a universal shelf registration statement on Form S-3 that will permit us
to raise up to $100 million of any combination of common stock, preferred
stock, debt securities, warrants or units, either individually or in units. The
sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders. Furthermore, additional capital may
not be available on terms favorable to us, if at all. Accordingly, no
assurances can be given that we will be successful in these endeavors.

We
maintain cash balances in many subsidiaries through which we conduct our
business. The repatriation of cash balances from certain of our subsidiaries
could have adverse tax consequences. However, these cash balances are generally
available without legal restrictions to fund ordinary business operations. We
have transferred, and will continue to transfer, cash from our subsidiaries to
us and to other international subsidiaries when it is cost effective to do so.

Operating
Activities. During
the three months ended March 31, 2009, we used $2.3 million of cash
for operating activities which included approximately $0.5 million related to
our idle facilities. We used
approximately $1.8 million of cash to fund operations and working capital
needs, which primarily related to materials used in production, salaries and
rent obligations for our current facilities.

Investing
Activities. During
the three months ended March 31, 2009, net proceeds from purchases, sales
and maturities of marketable securities generated $1.3 million of cash
which we used primarily for operations. Our other primary investing activity
was the purchase of property and equipment of $0.5 million primarily
related to facility improvements and information systems.

Financing
Activities. During
the three months ended March 31, 2009, financing cash proceeds were
related to proceeds from option exercises.

Our commitments under
leases and other obligations are described in our Managements Discussion and
Analysis of Financial Condition and Results of Operations and in the Notes to
the Consolidated Financial Statements included in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 filed with the SEC on March 13,
2009. There has been no material change
during the three months ended March 31, 2009 in the contractual
obligations disclosed as of December 31, 2008.

Our capital requirements
depend on numerous factors, including market acceptance of our products, the
resources we devote to developing and supporting our products, and
acquisitions. We expect to devote substantial capital resources to continuing
our research and development efforts, expanding our support and product
development activities, and for other general corporate activities. Our future
capital requirements will depend on many factors, including:

Our primary market risk
exposures are foreign currency fluctuation and interest rate sensitivity.
During the three months ended March 31, 2009, there have been no material
changes to the information included under Item 7A, Quantitative and
Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 filed with the SEC on March 13,
2009.

Evaluation
of disclosure controls and procedures. We have established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15
(e) and 15d-15(e)) that are designed to provide reasonable assurance that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, such as this Quarterly Report on Form 10-Q, is
recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms. Disclosure controls are also designed to
provide reasonable assurance that such information is accumulated and
communicated to our management, including the principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.

Based on their evaluation
as of March 31, 2009, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures
are effective to provide reasonable assurance that information we are required
to disclose in reports that we file or submit under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms.

Limitations
on the Effectiveness of Disclosure Controls and Procedures. Our management,
including our principal executive officer and principal financial officer, does
not expect that our disclosure controls and procedures will prevent all error
and all fraud. A control system can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within Caliper have been detected. These
inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people or by management override of
the control. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

Changes
in internal controls. There were no changes in our internal control
over financial reporting, identified in connection with the evaluation of such
internal control that occurred during the first quarter of 2009 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

Commencing on June 7,
2001, Caliper and three of its then officers and directors (David V. Milligan,
Daniel L. Kisner and James L. Knighton) were named as defendants in three
securities class action lawsuits filed in the United States District Court for
the Southern District of New York. The cases have been consolidated under the
caption, In re Caliper Technologies Corp. Initial Public Offering Securities
Litigation, 01 Civ. 5072 (SAS) (GBD). Similar complaints were filed against
approximately 300 other public companies that conducted initial public
offerings of their common stock during the late 1990s (the IPO Lawsuits). On August 8,
2001, the IPO Lawsuits were consolidated for pretrial purposes before United
States Judge Shira Scheindlin of the Southern District of New York. Together,
those cases are denominated In re Initial Public Offering Securities Litigation,
21 MC 92(SAS). On April 19, 2002, a Consolidated Amended Complaint was
filed alleging claims against Caliper and the individual defendants under
Sections 11 and 15 of the Securities Act of 1933, and under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as well as Rule 10b-5 promulgated thereunder. The Consolidated Amended
Complaint also names certain underwriters of Calipers December 1999
initial public offering of common stock as defendants. The Complaint alleges
that these underwriters charged excessive, undisclosed commissions to investors
and entered into improper agreements with investors relating to aftermarket
transactions. The Complaint seeks an unspecified amount of money damages.
Caliper and the other issuers named as defendants in the IPO Lawsuits moved on July 15,
2002, to dismiss all claims on multiple grounds. By Stipulation and Order dated
October 9, 2002, the claims against Messrs. Milligan, Kisner and
Knighton were dismissed without prejudice. On February 19, 2003, the Court
granted Calipers motion to dismiss all claims against it. Plaintiffs were not
given the right to replead the claims against Caliper. The time to appeal the
dismissal has not yet expired. In March, 2009, all of the plaintiffs,
underwriters and issuers involved in this litigation entered into a new global
settlement agreement. This settlement
agreement is still subject to approval by Judge Scheindlin, and will not be
considered final until this approval is obtained. The hearing for final approval of the
settlement has not yet been scheduled. The settlement agreement, if approved by
Judge Scheindlin, will provide Caliper with a release of all claims against it,
and will not require any payments from Caliper. The final resolution of this
litigation is not expected to have a material impact on Caliper.

On January 23, 2009,
Caliper filed and served a patent infringement suit against Shimadzu
Corporation and its U.S. subsidiary, Shimadzu Scientific Instruments, Inc.,
in the United States District Court for the Eastern District of Texas. The
complaint was promptly served upon Shimadzus U.S. subsidiary. In this suit, Caliper alleges that Shimadzus
MCE-202 MultiNA instrument system, which performs electrophoretic separations
analysis of nucleic acids, infringes 11 different U.S. patents owned by
Caliper. Shimadzu filed an answer to this complaint on March 24,
2009. In its answer, Shimadzu denied
infringement of any valid claim of any of the 11 patents asserted against
Shimadzu by Caliper, and alleged that each patent asserted by Caliper is
invalid and/or unenforceable. A
scheduling conference for this litigation has been scheduled for no later than May 8,
2009.

From time to time Caliper
is involved in litigation arising out of claims in the normal course of
business. Based on the information presently available, management
believes that there are no outstanding claims or actions pending or threatened
against Caliper, the ultimate resolution of which will have a material adverse
effect on our financial position, liquidity or results of operations, although
the results of litigation are inherently uncertain, and adverse outcomes are
possible.

Our risk factors are
described in Part I, Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2008 filed with the SEC on March 13,
2009. There have been no material changes in the risks affecting Caliper since
the filing of such Annual Report on Form 10-K.

Second Amended and
Restated Loan And Security Agreement, dated as of March 6, 2009, by and
among Caliper Life Sciences, Inc., Silicon Valley Bank, NovaScreen
Biosciences Corporation, Xenogen Corporation, Xenogen Biosciences
Corporation, and Caliper Life Sciences Ltd.

10.2

Caliper Performance
Bonus Plan.

10.3

Non-Employee Director
Compensation Policy.

31.1

Certification of Chief
Executive Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended,
and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief
Financial Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended,
and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Chief
Executive Officer Required Under Rule 13a-14(b) or Rule 15d-14(b) of
the Securities Exchange Act of 1934, as amended, and 18 U.S.C.
Section 1350.

32.2*

Certification of Chief
Financial Officer Required Under Rule 13a-14(b) or
Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350.

* The certifications attached as Exhibits
32.1 and 32.2 accompany this Quarterly Report on Form 10-Q pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Caliper
for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended.

Second Amended and
Restated Loan And Security Agreement, dated as of March 6, 2009, by and
among Caliper Life Sciences, Inc., Silicon Valley Bank, NovaScreen
Biosciences Corporation, Xenogen Corporation, Xenogen Biosciences
Corporation, and Caliper Life Sciences Ltd.

10.2

Caliper Performance
Bonus Plan.

10.3

Non-Employee Director
Compensation Policy.

31.1

Certification of Chief
Executive Officer Required Under Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended,
and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief
Financial Officer Required Under Rule 13a-14(a) or Rule 15d-14(a) of
the Securities Exchange Act of 1934, as amended, and pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Chief
Executive Officer Required Under Rule 13a-14(b) or
Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350.

32.2*

Certification of Chief
Financial Officer Required Under Rule 13a-14(b) or
Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. Section 1350.

* The certifications attached as Exhibits
32.1 and 32.2 accompany this Quarterly Report on Form 10-Q pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Caliper
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.